4 Countries in the Process of Adopting a Competition LawBolivia Cambodia Dominican Republic Ecuador Ghana, Guyana, Hong Kong Lesotho MozambiqueNigeria Swaziland Togo, Trinidad and Tobago United Arab Emirates Yemen 5Transnational market sharing in Africa the case of the beer market 6SAB Millers Expansion in AfricaSAB first expanded beyond the borders of South Africa in 1910 with the formation of Rhodesian Breweries In 1951, Rhodesian Breweries invested in a new brewery in Ndola, Zambia In 1965 SAB acquired a minority investment in South West Breweries in Namibia. In 1973, SAB established breweries in Botswana and Angola and three years later acquired Swaziland Breweries. In 1980, the company expanded into Botswana by acquiring a controlling interest in Kgalagadi Breweries and completed its southern African beer involvement in 1981 by securing a controlling interest in Lesotho Brewing Company and Maluti Mountain Brewery. In 1994, SAB was invited to revitalise the beer industry in Tanzania a joint venture with that country's government and to re-enter the beer markets of Zambia, Mozambique and, later, Angola. 7SABI Miller expansion in East Africa at the turn of the centuryIt entered the Ethiopian market in 1998 ( through its participation in a joint venture with International Beverage Corporation of Ethiopia the majority share holder of the venture). South African Breweries also bought a 40 stake in Nile Breweries thus creating a joint venture with the Madhvani Group which enjoyed a 57 market share of the Ugandan market in 1999. Mozambique's national brewery (Cervejas de Mocambique (CDM) is 65 owned by South African Breweries since 1997 when it was privatized The government has retained a 30 share in the brewery, while private sector broker, SPI Investimentos, bought the remaining 5. 28 October 1997,Panafrican News Agency 8Transnational market sharing/merger in the beer industry (Kenya and Tanzania) Competition looks set to break out once again in the Tanzanian and Kenyan beer markets with the possible dismantling of the joint venture arrangement between two of the world's largest drinks groups, SABMiller and Diageo.() A key aspect of the agreement was that TBL undertook to brew and distribute EABL's products under licence in Tanzania and EABL closed down its brewing and distribution operations in Tanzania. SABMiller closed its operation in Kenya. () The 2002 alliance between SABMiller and Diageo ended a price war that had kept beer prices in the two countries stagnant for five years. SAB Miller's decision to take action against Diageo seems to have been prompted by news that EABL had reached a conditional agreement to buy Serengeti for an undisclosed sum. July 31st 2009 Anne Crotty SABMiller, Diageo divorce set to aid competition , Business Report 9Transnational market sharing/merger in the beer ind (Kenya and Tanzania)Beermaker East Africa Breweries yesterday moved to consolidate its grip of domestic beer consumption by entering into a deal with its rival, Castle Brewing, that allows it to assume total control of the market. In the deal, East African Breweries cedes 20 per cent of the shares of its local subsidiary, Kenya Breweries, for a similar stake in Tanzania Breweries, which is owned by South African Breweries International. This amounts to the two parties entering into a gentleman's agreement to keep out of each other's turf, with South African Breweries taking control of the Tanzania market and East African Breweries retaining its hold on Kenya. The deal, announced yesterday, brings to an end the price wars between the rivals that have kept beer prices stagnant for the past five years. May 15, 2002, The Nation, Nairobi 10Diageo (50,03)South African Breweries SABIEast African Breweries (52,83)20 stake20 stakeTanzania BreweriesKenya Breweries LTD (KBL)Castle Brewing Kenya ThikaKibo Breweries MoshiStops manufacturing In Tanzania Stops manufacturing in KenyaKenyaTanzania 11Limited Cross LicenceSouth African Breweries SABIEast African Breweries20 stake20 stakeTanzania BreweriesKenya Breweries LTD (KBL) Moshi ThikaKenyaTanzania 12The deal is approved in Kenya and TanzaniaThe ( Kenyan) Government has approved the takeover of the Thika-based Castle Brewing Kenya Ltd by East African Breweries Limited (EABL). Finance Minister Chris Obure said in a Kenya Gazette notice dated June 20 that he had authorised the takeover. About 1,000 workers lost their jobs mid last month when CBK's parent firm, South African Breweries International (SABI), reached an agreement with EABL for shares exchange. Panafrican News Agency (PANA) Daily Newswire 26 July 2002, Dar es SalaamTanzania's Fair Competition Commission Thursday approved a merger of Tanzania Breweries Limited (TBL) and its main rival, KIBO, after initially halting the deal on technical grounds. Industries and Trade Minister Juma Ngasongwa's approval endorses a market sharing arrangement consummated in May between their parent companies, South African Breweries International (SABI) and Kenya's East African Breweries Ltd (EABL). Tanzania was initially cagey about the deal, arguing that it could lead to price increases and job losses and the regulatory authority said its earlier fears had been allayed. "After careful consideration of the transaction and its impact to the economy, the Minister of Industry and Trade has duly approved the takeover as applied," Ngasongwa said in a statement. Jun 23, 2002, The East African Standard,Nairobi 13Transnational market sharing/merger in the beer industry (Kenya and Tanzania)The merger has been severely criticised with cynics protesting that under the deal, TBL would control more than 90 percent of the beer market in Tanzania, with the only competition left coming from the less popular Associated Breweries of Dar es Salaam and imports. "The implication of such monopolies is obvious. Breweries end up with a free hand to hike prices at will, which is unacceptable under the liberalised economy that encourages fair trade practices," one analyst said. More disturbing, the analyst said, the merger was carried out clandestinely without the knowledge and authorisation of the minister responsible. 22 May 2002,Panafrican News Agency, Daily Newswire 14Transnational market sharing/merger in the beer industry (Kenya and Tanzania)Any new mergers or acquisitions in the Tanzanian beer market would be subject to close scrutiny by that country's competition authorities, which are intent on preventing a repeat of the present monopoly market structure. Godfrey Mkocha, the director-general of Tanzania's Fair Competition Commission, spoke to Business Report last week of his concerns about the monopoly situation created by the 2002 market-share agreement between SABMiller and Diageo. He added that the arrangement meant that TBL was left with almost 96 percent of the Tanzanian beer market. If the Diageo/SABMiller joint venture is terminated Mkocha said any subsequent initiatives either party attempted to implement in Tanzania "would be subject to competition effects analysis". Aug 4 2009 Anne Crotty Tanzania to behead beer monopoly , Business Report 15Transnational market sharing/merger in the beer industry (Kenya and Tanzania)SAB yesterday won a High Court injunction preventing Diageo, the world's largest drinks group, from taking a stake in a Tanzanian brewing group. SAB currently has a contract to brew and distribute Diageo's beer in the country. But Diageo is trying to end this agreement and take control of rival Serengeti Brewery, which competes with SAB's Tanzania Brewery. SAB claims this would be a breach of a 2002 deal preventing Diageo from competing in the same market. Through this deal, the pair control-85 of Tanzanian beer sales, but if Diageo purchases a stake in Serengeti SBL, the country's second largest brewer, it would enter the market in its own right with a 30 share. SAB, which earns about 30m annually from its stake in Tanzania Breweries, would see its market share shrink to 70. 19 Aug 2009 Court battle Diageo wants to break into East Africa , Daily Mail 16The planned expansion of SAB in West AfricaSAB, having established a foothold in East Africa, is now shaping up to move into the West Africa market, the Financial Mail reports. SAB already owns breweries in Ghana, and has now begun exporting stout to Nigeria, Africa's second-largest beer market after South Africa itself. The company also plans to sell its stout in Cameroon, Africa's third largest beer market. SAB estimates that stout, which is a dark-brown beer brewed from roasted malt, could hold as much as 30 percent of the market in West Africa. 21 February 20,2001 Chamber World Network 17(.) While we will always remain true to our roots in the wine business, we are fast becoming a significant force in the beer and soft drinks sectors. These last few years have seen us consolidating our acquisitions, upping our investments and strengthening our knowledge base in each of these areas. () We can see how our traditional values of listening, pragmatism, goodwill and efficiency link in with todays international cooperation, synergy and flexibility to open up a future where we are even better placed to serve our customers and partners. As a family concern we are in a position to direct all our resources into giving customers the best possible value for their money. As a group, our aim is to go forward in a spirit of deference to build for the future and continue to develop all our areas of expertise 18Strategic Alliance between SAB and CastelSouth African Breweries plc (SAB) and the Castel Group, Africa's two largest beverage companies, have joined into a strategic alliance to rationalise and strengthen their operations on the continent. SAB will acquire a 20 stake in CBB, whilst the Castel Group will acquire a 38 stake in SABI Africa, effectively by way of share exchange. SABI Africa has operations in 12 countries, including Angola, Botswana, Uganda, Ghana, Kenya, Malawi, Tanzania, Zambia and Zimbabwe. Castel Group has beer, carbonated soft drink and mineral water interests, in Francophone Africa, including Angola, Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Cote d'Ivoire, DRC, Ethiopia, Gabon, Mali, Tunisia, Morocco, Niger, Senegal and Togo. 07 March 2001New Vision 19Transnational anticompetitive market sharing ?Castel subsidiaries have varying degrees of profitability all are high performers. According to SAB Miller, Castel sold 13.4 million hectoliters of beer in 2007 ( 5,5 ). These sales figures were made possible by a market sharing agreement, made in 2001, that enabled both groups to protect their preferred zone, without fierce competition. A monopoly in progress ? This agreement enabled us to develop opportunities , justified, Najil Fairbass, SABMiller Communications Director. Before adding There may be antitrust laws at the national level, but none covering the continent. I dont see what the problem is. Philippe Perdrix Le marché de la bière africaine monte en pression Jeune Afrique 10/09/2008 20Houblon.net Portrait de Pierre Castel , May 2008The Dutch brewer, Heineken, gave up production in Angola during the war. The Heineken facilities were taken over by Castel, who is still operating in Angola, where he has made substantial profits. In the mid 1970s, when wine sales were down in France, 33 Export and Castel beer sales were high in the former Portuguese colony. So were profits. Castel Frères gross margin exceeds 50. Africa is a cash cow for the company. Trusting his luck, Pierre Castel reinvested his profits. He multiplied his market conquests Cameroon, Togo, Mali, Tchad, Senegal, Niger, Benin... until he acquired Brasseries et Glacières Internationales, in 1990, which guaranteed his companys dominant position in Africa. Castel also became the exclusive Coca Cola bottler in a dozen African countries. This year more than 2 billion liters of beer and soft drinks will be produced by his various African plants. 21Houblon.net Portrait of Pierre Castel , May 2008Man to man. Over the years, his contacts increased. African heads of state become his friends . If someone gives me a hard time, I get in touch with my friends so they can solve the problem, he says. Like imports by Lebanese merchants in the Central African Republic. I told the government If you dont stop them, I will freeze my investments. Same thing in the Ivory Coast, where he controls one of the major sugar plants, Sucaf. This spring, he asked to see Laurent Gbagbo so that over the border smuggling would be stopped. A few weeks later, the Ivory Coast government banned sugar exports for two years ! Castels sister, Christiane, explains We are true to our word. Pierres version Im not linked to any scandals ! 22Pierre Castel, Tireless Globe Trotter() He (Pierre Castel) travels to Africa at least once a month. Its where I feel most at home, as he says repeatedly. Its also where this business owner can best express his talents as a diplomat and a negotiator. With remarkable results. () His knowledge of Africa has enabled him to become a major brewer on the home turf of Sab-Miller, the South African brewer that is the worlds number 2 beer producer. To avoid going head on against a competitor producing 450 million hectoliters of beer per year, the French entrepreneur decided to negotiate an exchange of shares with his major competitor in countries like Mozambique, Angola and Botswana. Its better to have an undisputed monopoly than to be weakened by competition , argues the CEO. Frédéric Guyard, Pierre Castel, le Globe-trotter infatigable 27 Mai 2009, Rayon Boisson, Le magazine des boissons en grande distribution 23Some insights from this (and other) examples

In developing countries, national markets are often small and

there is room for only a few players

2) In some sectors such as cement, beer, infrastructure, the role of

multinational firms in the economy of small developing countries

is crucial because there is little local capital.

3) Multinationals enter national markets either through the

privatization process or by entering into joint venture with local

players. Multinational firms tend to be more efficient than domestic

firms which have a difficult time competing with them.

24Some insights from this (and other) examples4) In small developing countries, domestic (national) markets often are oligopolistic or monopolistic. 5) The (multinational) oligopolists established in a small developing country are often also established in a number of other small developing countries and therefore develop multi-national market strategies. As a result foreign competition in each country is weakened by the fact that in case of a competitive attack in the country, the attacked firm(s) can retaliate against the attacker on a number of other national markets (example when SAB attacked KBL in Tanzania, KBL retaliated in Kenya) 25Some insights from this (and other) examples6) Barriers to entry can also be heightened by the vertical restraints incumbent oligopolists or monopolists can impose on the retail sector and by the fact that they use their connections with the political leadership to prevent entry ( example anti-competitive practices in East Africa and Castel interview) 7) In developing their multinational strategies the regional oligopolists are aware of the fact that there is no trans-national competition law and that they can allocate national markets among them. ( example SABI CEO did not see any problem dividing the West African market with Castel since they is no pan-African competition law) 26Some insights from this (and other) examples8) The interdependence between national markets means that events or transactions occuring outside of a country are likely to affect the competitive conditions of that country.( ex the fact that Castel has committed itself not to attack SABI on its traditional market means that SABI will not compete with Castel in west african countries). 9) National competition authorities only have a limited ability to meaningfully enforce their domestic laws as they do not always have a full knowledge of the relevant events taking place outside the country which influence competition domestically and/or do not have control over them 27Some insights from this (and other) examples10) Competition policy and trade policy must be better coordinated. ( The market sharing arrangements between SABI and KBL in East Africa or between SABI and Castel in West Africa deprive African countries from the benefits of trade and competition) 11) Cooperation between national competition authorities and/ or the development of regional approaches to competition law enforcement could alleviate the situation. ( Wemoa, Comesa, etc..) 28Thank You for Your Attentionfrederic.jenny_at_gmail.com

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